the history of K&H Bank

With a birthday corresponding to the time when the two-tier banking system was established in Hungary, K&H Bank started its operation on 1st January 1987.

K&H Bank was established by the Hungarian state and certain “inherited” companies (active in agriculture, food industry, commerce and tourism). During the period ending in 1992, K&H Bank expanded its activities and clientele, launching new services and dynamically increasing the number of branches. In parallel to trends in the economic situation of Hungary, the position of many clients deteriorated, a circumstance leading to a significant rise in the non-performing loan portfolio. For this reason and to ensure continuous growth, bank consolidation took place, involving a capital increase and subordinated loans. In 1996 the strengthened financial institution merged with IBUSZ Bank, a subsidiary which specialized in retail services. The merger resulted in a universal large bank which boasted the second largest branch network in Hungary. In the same year, K&H Bank joined VISA and Europay (today MasterCard), so as to start developing one of the widest ranges of bank cards in Hungary. As the first step in bank privatization in 1997, the European Bank for Reconstruction and Development (EBRD), as a financial investor, provided subordinated loans worth USD 30 million to K&H Bank, thereby strengthening its capital position. A tender was announced. The winner, a consortium formed by Kredietbank (Belgium) and the Irish Life insurance company, acquired an ownership in K&H Bank by purchasing a 9.6% share package, and then carried out a capital increase equal to USD 60 million. As another change in the ownership structure, EBRD’s subordinated loan was converted into shares. As a result of these measures, Kredietbank and Irish Life, the strategic investors in K&H Bank, acquired an ownership of 23.1% each, and EBRD acquired 18.2%. The capital increase helped K&H Bank turn into a financial institution with stable reserves and good solvency (even by international standards), as well as bright growth prospects. In 2001 the Belgian owner, KBC Bank and Insurance Group, merged K&H Bank with the Hungarian subsidiary of the Dutch ABN AMRO Bank. The merger extended to the subsidiaries of the two banks, with the exception of Argosz Insurance (KBC’s non-life insurance company), LeasePlan (ABN AMRO’s car fleet management firm) and Mébit Insurance (ABN AMRO’s insurance venture).

Still before the merger, in February 2001, according to an agreement with ABN AMRO Bank, KBC exercised its purchase option and acquired a share package of 17.9% from Irish Life and 7.33% from Espirito Santo Asset Administration, thus increasing its ownership in K&H Bank to 98.51%. The shareholders of the banks gave their approval to the merger at their parallel annual general meetings on 27 April 2001. Then, having been licensed by the Hungarian Financial Supervisory Authority (PSZÁF) and the Competition Office, K&H Bank was registered by the Company Court on 1 July 2001 as a financial institution 59% owned by KBC Bank and 40% owned by ABN Amro Bank.

As a result of the merger, one of the largest financial institutions of Hungary was established, with total assets of HUF 1,145 billion. K&H lead Hungary’s corporate banking business and was second in the retail banking sector. One year later K&H Bank successfully finished the remaining tasks stemming from the merger by launching a new integrated account management system in the retail branch network. In 2002, K&H Bank, as the first financial institution in Hungary, started to distribute microchip-based cards. These are far more secure than cards with magnetic stripes and data on them can not only be stored but can also be regularly modified and used for identification purposes. However, the main novelty of the year was when K&H Bank, as the first financial institution in Hungary, launched a guaranteed money market fund. At the end of the subscription period, the portfolio in the investment fund ‘K&H fix plusz’ was over HUF 3.5 billion. Launched in February 2003, the investment fund ‘K&H fix plusz 2’ also attracted keen interest. The outstanding success of the two investment funds helped K&H Fund Management become the third largest player in the market of fund management companies; its business activities are developed continuously, and K&H’s business results are dynamically improving.

Kredietbank, the legal predecessor of KBC Bank, entered the market in Hungary as the winner of K&H Bank’s privatization tender in 1997. The KBC Group increased its ownership from the initial 23% to 100%.